Health Care - where first class is second class

While most of us would haggle if we were to pay extra in a hotel; we don't really do so in hospitals. Maybe, because its to do with our or a beloved's health. What is required is a reform in the India health insurance sector.

Harsh Roongta

26 May 2009

Imagine this scenario. You are staying in a 5-star hotel and invite some guests over for dinner at one of its posh restaurants. You enjoyed an excellent dinner and all goes fine till the time comes for paying the bill. The maitre-d comes over and asks you if you are staying with them and if so whether you are staying in their regular room or their suites or the presidential suite. When you ask him the reason for the question, he tells you that the charges for the dinner will depend on the class of the room that you are staying in. Do you find that strange? I bet you do. After all, this service (the dinner) is outside the room you are staying in, the ambience is the same for everyone in the restaurant, the chef and his staff and the kitchen is the same, the food is the same and it is delivered by the same set of waiters in the same room irrespective of which class of room you stay in (or whether you stay in the hotel at all or not). You will no doubt argue that for the room itself you will be required to pay a daily charge in accordance with the class you choose to stay in and why should any other service not provided in the room be charged on a differential basis.

But strangely nobody argues when hospitals charge for everything based on the class of room that you stay in. If you choose to stay in single air conditioned room (called first class or deluxe or whatever) not only the daily room rent but even the operation room charges, medical procedure charges, doctors fees, etc. will be 2-5 times higher than if you were staying in one of their general wards. In fact, if you are unfortunate enough to be shifted to the ICU from your room, the charge in the ICU (which is exactly the same for everyone irrespective of which room you originally were in) also follows the same lop sided pricing pattern. The only reason hospitals have this pricing basis is because unlike the hotel (where the guest can go to another hotel/restaurants for dinner) they know that their consumer is captive and can not go anywhere else for his treatment. In fact for the only item where the consumer has some choice (medicines) most hospitals do not have this differential pricing based on class of bed. A quick check with medical practitioners reveals that this kind of differential pricing is unique to India and not practiced in any other major country. The only argument given in favour of this practise is that this is to cross subsidise the poor general ward patients who the hospitals are required to treat for free (or at highly concessional rates) as most of them (the hospitals) have got the land at a cheap rate from the government and/or have also availed other fiscal concessions from the government.

Most consumers may be forgiven if they think this only affects the rich people since they are the only ones wanting to stay in first class (or deluxe) rooms where such differential is the highest. However, as anyone who has had the unfortunate experience of trying to get an unplanned admission for a loved one will attest, invariably most hospitals will say that all beds are available only in the private first class rooms. Consumers have no choice but to accept that or do the round of the hospital administration pleading with them to give them rooms in the lower class, which are more affordable.

The Indian health insurance industry is becoming large and accounts for a significant portion (around 8%) of the hospitals billings and one would have thought that they would use their clout to get such practices changed. However, very clearly the health insurance industry has yet to acquire that much clout. Most insurance companies try to reduce the burden by restricting the daily room rents that they will reimburse under the health insurance plan. In such cases consumers have to bear the difference between the maximum room rent payable under the insurance plan and the actual room rent charged. However, in a worrying trend, at least one company has introduced a co-pay provision under which the consumer will pay for the higher expenses (on operations, doctor's fees, etc.) charged due to the customer opting (or being forced to take) for a private air conditioned room even though the total expenditure may be well within the policy limits. Clearly the insurance company is transferring the entire burden arising from such differential pricing practices on to their consumers.

Health care reform, especially for issues that affect only the middle classes, is still not big enough to become an election issue in India. However with the growing assertiveness of the middle class which is no longer prepared to accept the below standard services in public hospitals and who bear the brunt of such differential pricing policies in the private health care hospitals will ensure that sooner rather than later these kind of practices will invite regulations from the government. Till then the consumers must take care to choose their insurance company appropriately or just grin and bear it.

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